An Empirical Analysis on the Relationship between Chinese Economic Growth and Inflation during 1953-2007

This paper focuses on doing an empirical analysis on the relationship between the Chinese economic growth and inflation by using the econometric models of ARDL, VAR and VECM during the three different periods of 1953-1978, 1979-2007 and 1953-2007. The empirical analysis has achieved four results. Firstly, it has approved that the structure relation between the Chinese economic growth and inflation has been changed since 1979. Secondly, the correlation between the Chinese economic growth and inflation was substantial negative during 1953-1978; however, it became substantial positive during 1979-2007. Thirdly, there was not any Granger causality relation between the Chinese economic growth and inflation during 1953-1978, but there was a two-way Granger causality between them during 1979-2007 in the short run and long run. Finaly, the unequilibrium between the Chinese economic growth and inflation could be adjusted during 1979-2007, but it was inversely during 1953-1978.